Credit Suisse First Boston (CSFB) yesterday downgraded consumer goods conglomerate Unilever from a “hold” to a “sell” rating, highlighting analysts’ and investors’ concerns about the performance of the Anglo-Dutch company and the integration of its major US acquisition Bestfoods.

According to Thomson Financial/First Call, out of the 31 analysts who follow Unilever’s stock, CSFB is the only one to issue such a blatantly negative rating. Five say it “underperforms” however, and the remaining 25 analysts have rated the stock a “market performer”, apparently indication enough for many investors that the stock should be sold.

The reasons for Unilever’s fall from grace largely revolve around the sales performance of Bestfoods’ lines prior to its US$20bn takeover a year ago. According to the report issued by CSFB, the company’s sales growth was artificially propped up, “driven quite hard by trade promotions rather than consumer demand”.

“Consumers themselves,” concludes the report, “did not have a heavy demand for Bestfoods’ products.”
Since taking over, Unilever has shed Bestfoods’ smaller brands, to focus instead on better-known names such as Hellmann’s mayonnaise. These have witnessed a decline in US market share recently however, and when the conglomerate’s H1 results were posted last month it became apparent that Bestfoods’ performance was a drag on Unilever’s earnings, reducing them by 0.9% in the Q2.

Unilever has declined to comment specifically on CSFB’s report.

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