Unilever's big, fat problem

by Monica Watrous
Share This:
Search for similar articles by keyword: [Unilever]
Unilever's margarine business is struggling.

LONDON — Consumers are eating less margarine, and for Unilever P.L.C. that’s a big, fat problem.

Higher sales of the company’s savory spreads and dressings in the recent year weren’t enough to offset declines in Unilever’s margarine business, which gained market share but remained pressured by lower demand in the category and price deflation.

The maker of Hellmann’s and Flora recently announced plans to separate its European and North American spreads operations into a standalone unit later this year with a new emphasis on cooking and baking. The company also is launching new products in the growing categories of vegetable oils and butter.

“In spreads, consumer habits have been changing faster than we have,” said Paul Polman, chief executive officer of Unilever, during a Jan. 20 earnings call with financial analysts. “People are eating less bread and spreading less margarine. We need to speed up our plans and have already started to do so with the (blended margarine/butter) launches.

“The next step is the new business unit and unlocking the opportunities in cooking and baking and underpinning these with sharper targeting.”

For the year, Unilever’s Foods business unit, which includes savory, dressings and spreads businesses, had sales of €12.4 ($14.4 billion), a 0.6% decline compared to the previous year. Volumes fell 1.1%.

New Ben & Jerry's Core ice cream products contributed to sales growth in the United States.

Elsewhere in the portfolio, performance was mixed. Ice cream sales in the United States returned to growth on the strength of new premium products, including Ben & Jerry’s Cores ice cream and Breyer’s Gelato. Unilever expects to continue the momentum with the recent acquisition of Talenti gelatos and sorbettos.

Growth of tea in the United States was driven by Lipton K-Cups and new liquid concentrate, but weaker international sales dampened overall performance.

The Refreshment business unit saw its sales rise 3.8% to €9.2 billion ($10.6 billion) and volumes rose 2%.

Currency headwinds and slow growth in emerging markets, particularly in China, where sales fell 20% during the fourth quarter, challenged Unilever’s full-year performance, but efficiency and disciplined cost-savings programs helped the company deliver 2% growth in core earnings per share for the year.

“In our categories market growth in emerging countries slowed to around 4% in the second half,” Mr. Polman said. “All of this came from price. There was no volume growth in these markets. It is many years since we actually have seen that. And conditions remain very tough in developed markets as well.”

Challenging market conditions in Europe offset a modest recovery in the United States. Revenues for the year declined 2.7% to €48.4 billion ($55.9 billion), which included the effect of divesting a handful of brands that included Wish-Bone dressings and Skippy peanut butter in 2013 and Ragu and Bertolli pasta sauces and Slim-Fast in 2014. Underlying sales growth for the year advanced 2.9%, reflecting 1% from volume and 1.9% from price.

In the fourth quarter, underlying sales growth slowed to a disappointing 2.1%, with volumes down 0.4%. Revenues for the quarter increased 2.4% to €12.1 billion ($14 billion), reflecting a positive currency impact offset by the effect of net acquisitions and disposals.

With no significant improvement in market conditions expected in the year ahead, Unilever executives projected 2% to 4% underlying sales growth in 2015. The company said performance will remain soft in the first quarter with growth improving through the year.

Goals for the year ahead include a continued evolution of the portfolio, with an eye toward faster-growing and more value-creating categories and segments, while disposing more brands where such opportunities are limited.

“In foods, there are pockets of excellent growth opportunities,” Mr. Polman said. “We need to still get better at seeing the trends more quickly and acting faster, either organically through our own great brands or via acquisitions.

“It’s another example of the agility that we’re seeking.”
Comment on this Article
We welcome your thoughtful comments. Please comply with our Community rules.

 

 


The views expressed in the comments section of Food Business News do not reflect those of Food Business News or its parent company, Sosland Publishing Co., Kansas City, Mo. Concern regarding a specific comment may be registered with the Editor by clicking the Report Abuse link.