On the money: Unilever says foods "ready to grow again"
Foods to move to growth phase - Polman
Unilever has indicated that it plans to accelerate growth of its food brands in 2014, after taking a number of actions to stabilise the performance of the unit over the past 12 months.
Foods has proven the laggard of the Anglo-Dutch consumer giant's portfolio, which has seen growth driven by higher personal and home care sales. Unilever's performance in its food business has been sluggish in comparison - with underlying sales up just 0.3% in fiscal 2013.
Speaking to analysts on a conference call yesterday (21 January), CEO Paul Polman explained that the cash-generative food unit has enabled the firm to expand in other areas. "Foods is a category that has been for a long time in the role of funding growth in other parts of the business, as we streamlined its portfolio and cost, and shed under-performing assets... without it we could not have outperformed in personal care and home care."
In the last year management said it has strengthened its core food operations by selling off non-core brands and businesses where it does not feel it can generate sufficient returns while getting the top line moving. Disposals have included the Skippy peanut butter business and Wishbone dressings brand, along with a number of smaller assets.
Nevertheless, Polman emphasised that there is "still a drag" from "non-core parts of the portfolio". The group plans to continue to right-size the unit in the coming fiscal, he suggested. Indeed, reports surfaced today that the firm could be mulling a GBP1bn deal to dispose of its SlimFast weight management brand.
By streamlining its food operations and increasing its focus on "fewer bigger brands", Unilever believes that it has positioned its remaining brands for growth. During 2013, Unilever said some of its largest food brands were able to grow the top line. "Hellman's and Knor cooking products continue to grow and are doing particularly well in emerging markets," Polman revealed.
The group has also seen the "early stages" of recovery in its ailing spreads business. "By the end of the year, we got market shares growing again in margarine, with gains in 11 of our top 14 markets," Polman told analysts.
The company embarked on a marketing drive for its Flora brand in the UK, where it saw its share of the spreads category increase by 70 basis points. It also launched a "margarine with butter" in the US, Belgium and the Netherlands, Finland and Germany. A spokesperson for the group told just-food that this is "not a new concept" for the company.
"We had spreads containing up to 25% butter fat up until around 1920s and then phased out. This is about providing choice to the consumer and with healthier options always available. This range provides the goodness of plant oils with the tastiness of butter," the spokesperson said.
Despite the green shoots of recovery in food, Polman said that the company does not expect an immediate return to growth. "We are under no illusions that it will take time to get back to growth but there are some early signs of progress," he said.
Nevertheless, the chief executive insisted: "Foods is ready to grow again."
Polman said that the company is "ready" to "accelerate foods" beyond the 1.5% annual average growth rate that the business has seen over the last five years. Polman hinted that this will be achieved by stepping up the investment behind some of its key brands.
"Food remains a highly cash generative business and with our portfolio increasingly focused on our big global brands... it is increasingly becoming ready to grow again. Until now we have been spending no more... than we did in 2009 and that was the right decision. But now in a better position, there are early encouraging signs and the new marketing strategy for spreads, for example, is the right one."
While Panmure Gordon analyst Graham Jones said that Unilever's 2013 performance was "resilient" in the face of challenging conditions, he emphasised that growth was "still lacking" from 2014 estimates.
In particular, Jones emphasised that food was "very disappointing" in 2013. "The good news is that personal care continues to increase in importance within Unilever (it now accounts for 45.7% of EBITA), but foods still accounts for over one third of EBITA, and it has to be hoped that Unilever can at least arrest the decline of spreads in 2014," he wrote in a note to investors.
Hindustan Unilever Limited (HUL) is one of the leading fast moving consumer goods (FMCG) companies in India. It manufactures, and markets a wide range of consumer products for household consumption. T...
just-food's contributing editor Ben Cooper predicts what will be the key issues in food sustainability circles in 2015, with the debate over sugar likely to continue to rage, while supply chains - in ...
Synopsis Canadean's "Unilever N.V. : Consumer Packaged Goods - Company Profile, SWOT & Financial Report" contains in depth information and data about the company and its operations. The profile contai...
Unilever’s long term strategic direction is to achieve sustainable growth. In order to do so, Unilever aims to incorporate its customers, suppliers and employees into its sustainability programme and ...
- Maspex: M&A opportunities in eastern Europe
- Why "simple" and "real" will be industry buzzwords
- Why US Dietary Guidelines report deserves praise
- Nestle's 2014 results: 10 Things to Learn
- The just-food interview: Bega Cheese CEO
- Gruma FY earnings surge as margins improve
- Kerry Group CEO expects more M&A in 2015
- Glanbia FY profits beat analyst forecasts
- UPDATE: Mondelez confirms Irish plant changes
- Danone's Stonyfield launches layered yoghurt