Volume growth proves elusive for Unilever during first quarter
April 20, 2017
by Keith Nunes
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Unilever recently launched a new Ben & Jerry’s line called Topped.
LONDON — Unilever’s food business, which includes its Foods and Refreshment business units, saw sales rise 2.2% during the first quarter of 2017. Food business volumes fell 1.1%. Pricing and a focus on premium innovation in the Refreshment unit were key drivers of the sales growth.
|Graeme David Pitkethly, c.f.o. of Unilever
“In the current market conditions, growth continues to be driven by pricing rather than volume,” said Graeme David Pitkethly, chief financial officer, during an April 19 conference call with securities analysts to discuss first-quarter results.
During the quarter, Foods and Refreshment sales were €3.2 billion ($3.44 billion) and €2.3 billion ($2.48 billion), respectively. Foods sales were flat compared to the previous year while Refreshment sales rose 5.4%, according to the company. The results do not include the company’s spreads business, which it is in the process of divesting.
“In Foods, our priorities are to build scale in emerging markets and to modernize the portfolio,” Mr. Pitkethly said. “Knorr and Hellmann’s, our most global brands, continue to perform well. We’ve extended the Knorr Natural Mealmakers into salad dressings. And the Hellmann’s organic range is helping to attract those consumers who like mayonnaise, but don’t buy it frequently as they’re seeking to avoid processed foods.
Hellmann’s organic range is drawing new consumers for Unilever.
“Refreshment grew strongly in the first quarter, benefiting from our strategy of premium innovation and building in higher-growth segments. In ice cream, we’ve launched a new Ben & Jerry’s line called Topped, with a range of different toppings, and Magnum has extended into pint tubs.”
Andrew Stephen, vice-president of investor relations for Unilever United States, Inc., said that in North America total Unilever sales were down 1% during the quarter.
“Our Personal Care business is doing well, with growth and share gain driven by deodorants,” he said. “Foods volumes were held back by the impact of the later Easter on the spreads and dressings categories. And the decline in traditional black leaf tea is not yet compensated by growth from Pure Leaf and matcha, despite the encouraging start for both of those launches.”
Unilever's Magnum ice cream brand has expanded into pint tubs.
Mr. Pitkethly added that the environment the company is operating in is challenging. He cited rapidly changing consumer trends at the global and local levels as well as the impact of on-line sales and the rise of convenience stores.
“At the same time, the competitive landscape is changing and challenging our industry,” he said. “This is particularly the case in Foods. U.S.-based foods competitors are rebasing costs to varying degrees. The Froneri combination brings a new competitive dynamic to ice cream, and new entrants are developing so-called foods of the future with agile and new models.”
For the quarter, Unilever generated €13.3 billion ($14.32 billion) in sales, a 3% increase compared to the same period of the previous year. Volumes declined 0.1%, according to the company.
The decline in traditional black leaf tea is not yet compensated by growth from Pure Leaf and matcha, Unilever said.
In his opening comments during the conference call, Mr. Pitkethly expressed optimism about the overall global economic environment.
“I think it’s fair to say that the prospects for the global economy are looking a little brighter than they have done for a while,” he said. “While last year’s G.D.P. growth was the lowest since 2009, the forecasts for this year are now looking a little better. Employment levels in the developed markets are improving, and many of our key emerging market currencies, like India, Brazil and Indonesia, appear to be bottoming out.
“Commodity inflation is returning, and while this adds to the cost pressures for us, particularly in the first half of this year, it will, of course, be better news for the economies of the producing countries themselves, many of which contain large Unilever businesses, as you know.”