UPDATE: UK/NETHERLANDS: Unilever sees "early progress" in spreads
Flora sales see "early signs" of recovery
Unilever said today (21 January) it has witnessed "early signs of progress" at its struggling spreads business.
CEO Paul Polman said the Flora and Becel margarine owner had gained market share in most of its key markets during 2013.
"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.
Flora had seen its share of the UK spreads category increase by 70 basis points, Polamnd said. However, that improvement came after Unilever reverted to the product's original recipe after changes led to consumer complaints.
Spreads, which account for around 40% of Unilever's foods sales, has been a problem area for Unilever in recent years. The company's position in the category has been under scrutiny, with some analysts suggesting that the firm could look to sell off the unit.
"[Unilever's] performance in foods and refreshments has again been very disappointing in 2013... 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," Panmure Gordon analyst Graham Jones wrote in a note to investors.
In an attempt to reverse negative sales trends, the company has launched a number of products into the category, while stepping up marketing activity around its key brands.
Speaking to analysts today, Polman suggested that the company is seeing evidence of recovery. However, he said Unilever, the world's largest margarine supplier, wanted to grow the category as a whole, not just its brands.
"Our job is not just to win share within margarine but it is also to grow the margarine category as a whole with products that offer more healthy but still great-tasting alternatives to pure butter," Polman said.
Notably, the Unilever chief executive said margarine products containing butter had been launched in European countries. "They are all off to a good start," he said.
Polman added: "We are under no illusions that it will take time to get spreads back to growth but there are some encouraging early signs of progress."
His comments came after the Anglo-Dutch consumer goods giant booked an expectation-beating set of full-year numbers, pushing up the company's shares.
Underlying sales were up 4.3%, with gains driven by growth in emerging markets and the strength of its home and personal care operations.
However, questions continue to be asked by some analysts about the long-term growth prospects for parts of Unilever's foods business, which also includes Hellmann's mayonnaise, Knorr stock cubes.
Unilever insisted today it had been able to "stabilise" the performance of its food unit throughout 2013.
The business rebounded from a 0.3% drop in underlying sales in the third quarter. Fourth-quarter underlying sales from food were up 0.3% in the period, Unilever said. Over the year as whole, underlying food sales were up 0.3%. Nevertheless, volumes were down 0.6%.
"While foods growth remained lacklustre, it improved versus a very weak Q3," Sanford Bernstein analyst Andrew Wood suggested. "With two negative and two positive quarters during the year, full-year growth was just slightly positive."
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