Price War Eats Into Unilever Profit -- 2nd Update
July 19 2018 - 5:49AM
Dow Jones News
By Saabira Chaudhuri
LONDON -- A fierce price war between consumer goods giants hit
Unilever PLC hard in the first half.
The Anglo-Dutch maker of Dove soap and Magnum ice creams
reported anemic sales growth and lower profit for the six months to
June 30 as it discounted some products and struggled to raise
prices on others in North America and Europe.
Unilever, like other consumer goods companies, has long relied
on selling new or improved versions of products at higher prices to
boost growth. But that's being challenged by weak inflation,
Amazon.com Inc.'s rising prowess in selling household staples, and
declining brand loyalty as consumers use the internet to shop
around. Growing popularity of discount retailers, from dollar
stores to Germany's Aldi, is also pushing down prices.
Unilever's Chief Financial Officer Graeme Pitkethly said the
trend was particularly notable in condiments where a battle for
market share between Unilever and Kraft Heinz Co. has led to the
lowest average retail price on mayo in North America in seven
years. "We're going toe to toe in a battle to provide consumer
value," he said. Unilever owns Hellmann's mayonnaise.
Unilever also has a fight on its hands in deodorants where it
says Procter & Gamble Co. followed its lead in launching a dry
spray. The innovation, aimed at consumers who complained about the
wet feeling that accompanied traditional sprays, had lifted
Unilever's sales in recent quarters.
For the first half, Unilever reported underlying sales growth of
2.5%, driven almost entirely by volume, rather than price. The
company had in June warned first-half growth would be below its
full-year target of 3% to 5% because of a trucker's strike in
Brazil, which hurt sales growth by 0.6 percentage point.
"We think Unilever's sales performance is disappointing,
particularly in light of hot weather in the Northern Hemisphere
which ought to have boosted ice cream sales," said RBC analyst
James Edwardes Jones.
Unilever's underlying price growth for the period was just 0.2%.
Prices dropped in its beauty and personal-care division, but
climbed slightly in food and refreshments, and home care.
The North American market was particularly tough, with prices
falling by 0.3%. Volumes rose just 1% and declined in the second
quarter, which Mr. Pitkethly attributed to fewer new product
launches compared with the same period a year earlier.
The Anglo-Dutch company, whose brands also include Dove soap and
Magnum ice cream, reported net profit of EUR3.04 billion ($3.54
billion) for the six months to June 30, down from EUR3.11 billion
in the same period last year. Revenue declined to EUR26.4 billion
from EUR27.7 billion.
Unilever, which currently operates as two separately listed
companies -- Unilever PLC and Unilever NV -- is in the process of
working to unify its dual British-Dutch legal structure. Thursday,
Mr. Pitkethly said a shareholder vote was slated for October and,
despite opposition from "a small number of investors" he is "very
confident" that Unilever will be able to move entirely to
Rotterdam.
Write to Saabira Chaudhuri at saabira.chaudhuri@wsj.com
(END) Dow Jones Newswires
July 19, 2018 05:34 ET (09:34 GMT)
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