Polman outlines Unilevers response to global slowdown

Polman outlines Unilever's response to global slowdown

Unilever will shed 2,000 jobs from its global workforce this year as the Ben and Jerry's ice cream maker further streamlines its operations.

At an investor conference in London yesterday (4 December), the group outlined plans to respond to lower category growth by reducing costs.

Jobs will be cut and Unilever will also look to remove more SKUs from its portfolio.

Chief executive Paul Polman said the company needs to shift the focus of the business model as top-line growth slows amid an economic slowdown.

"The global economy has calibrated down about 1-1.5% and we probably should have done a better job seeing it coming," he told analysts. "We're using that opportunity to step up the performance and drive new energy into the organisation."

Management said the company has is targeting cost savings of EUR500m (US$684.1m) in 2014, on top of supply chain savings of EUR1bn. The group wants to reduce complexity from its business, improve its supply chain management and increase efficiency.

According to CFO Jean-Marc Huet, Unilever has made strides in improving its gross margin. In 2011, Unilever's gross margin stood at 39.8%, in 2012 it rose to 40% and in the first half of this year it improved 120 basis points to 41%.

However, Huet conceded Unilever is operating at margins below its peers, with competitors operating at around 500 basis points above Unilever.

Closing the gap will be achieved by a shift in the group's mix to higher-margin products. Unilever is therefore focused on "premiumisation", "margin accretive innovation" and "channel opportunities" in fast-growing areas such as drug stores.

In order to improve margins, Unilever aims to reduce the number of SKUs it carries by 30% by the end of fiscal 2014, focusing on fewer, bigger brands. The group will also shed non-core units in a process of "selected portfolio pruning" - primarily in the food space, Huet said.

This year, Unilever has sold off its Skippy peanut butter brand and its Wishbone dressings business in the US. The company has also been linked to the potential sale of its Peperami and Bifi meat snacks business, with market rumours putting Kerry Group as the front-runner in an auction process.

At the same time, Unilever is on the look-out for bolt-on acquisitions that are aligned with its overall strategy and targeted to emerging markets, management revealed.

The company also moved to calm speculation that it could be preparing to sell off its ailing spreads unit. The company is launching products into the category in an attempt to reverse negative sales trends, foods president Antoine de Saint-Affrique revealed. The "green shoots" of these efforts are starting to emerge, he suggested. However, de Saint-Affrique also stressed Unilever's spreads business was on a "long-term journey".