Unilever benefits from being present in the food sector, CEO Paul Polman has insisted, as analysts continue to weigh up the future of the consumer goods giant’s grocery business.
Speaking at the Consumer Analyst Group of Europe conference in London, Polman pointed to the strength of Unilever’s ice cream operations, said its savoury business in emerging markets was growing and argued that its non-food unit can benefit from its grocery arm’s relationship with retailers.
However, Unilever has faced questions over the performance of its food business. In 2011, underlying sales volumes from Unilever’s food unit fell 1.2%. The last three months of the year saw volumes drop 3.9%.
Some industry watchers have questioned Unilever’s presence in some food categories and, at the CAGE conference yesterday (19 March), one delegate put it to Polman that having food and home and personal care together was “old school”. The Unilever chief was told the “stellar” showing of personal care had not been reflected in the company’s share price because of the performance of its food business.
Polman said every category within Unilever’s business “needs to justify itself”. He said: “If we can build better shareholder value than anyone else, we will continue to do that. If someone else can do better, then we have to face some of the tougher decisions. It is very clear that our total portfolio is working for us. If you look at the shareholder return over three years, it’s not so bad. I agree that some of our food business needs to perform better,” Polman said.
The performance of Unilever’s spreads unit, which takes in brands including Flora and Becel, has been under the scrutiny of analysts.
Polman said Unilever had refocused its spreads business, which had enjoyed a compound annual growth rate of 3.7% over the last five years. “That’s a healthy growth rate next to [its] cash contribution,” he said. “It’s continuing to be a very, very important contributor to the company, not only for our foods category but also for the total Unilever portfolio. That’s obviously because of the very, very strong cash generation. We would not be able to accelerate growth in emerging markets without it.”
Broadly speaking, the Unilever chief insisted the “proximity” of the company’s food business to its customers helps its home and personal care operations.
“If you look at a company like ours, the combination of being in food and the proximity to the market that that gives you is a tremendous benefit in the speed we can roll out our personal care business with the local markets. It’s proving to be harder, sharper and more agile than some of the central models that we see from some of our competitors. It comes partly from our food heritage and food business that has a much closer proximity,” Polman said. “We are looking at how we can leverage the scale of our total business but, at the end of the day, even our food business, which is evolving, has to justify itself.”
He added: “Our ice cream business is on a roll, our savoury business in emerging markets is growing very fast and our spreads business is really competing differently and is generating a return than other people can achieve. For that reason, we are happy with the portfolio as we have it right now.”