Unilever: Update on its 2020 market performance

Last year in June, Unilever, consumer goods giant home to brands like Dove, Persil, Marmite, Ben & Jerry’s, Domestos, Hellman’s and 1000 more had decided to unify its legal structure under a single parent company.

The business which was divided between two parent holding companies: Unilever plc with shares listed in London and New York and Unilever NV with shares listed in Amsterdam and New York – had now merged into one company, Unilever plc based in London – transforming it into the biggest company in the FTSE 100. The decision which was finalised in November would offer the company more flexibility in case it wanted to do more mergers or acquisitions. 

Updating the market on its 2020 performance, Unilever announced its underlying sales grew by 1.9%, with 1.6% volume and 0.3% price. However, its total sales decreased by 2.4%, primarily driven by a negative impact of 5.4% from currency-related items, while underlying operating profit decreased 5.8%, but increased by 0.7% at constant exchange rates.

Alan Jope, the chief executive said that 60% of the business had enjoyed growth. “2020…I think it’s stating the obvious to say it was far from business as usual. Typically, we would start this presentation by sharing our underlying sales growth, underlying operating margin earnings and cash. But in this year of incredible volatility and uncertainty, we prioritized three things: that was volume-led competitive growth, absolute profit and cash delivery.”

Overall, in 2020 Unilever has reported a 3.5% loss bringing it to €8bn, which had subsequently been brought back up to 3.9% profit after the currency movements came into place. The political unification is hoped to serve as a tool for higher growth and “to prove incontrovertibly that sustainable business does drive superior financial performance.”

At the beginning of this month, Unilever brought in something called “Strategy refresh” – lose on the roundabouts, win on the swings as a result of their products being used by 2.5 billion people around the world. PG Tips and Lipton brands will be sold or demerged together with several other smaller beauty brands in Europe and North America. Due to COVID-19 their products involving hygiene and laundry products, as well as their plant-based food and “foods consumed at home” had seen a rise in sales, while grooming products declined as people are spending more time in their homes.

There have also been big swings in sales of individual brands. Domestos sales had risen by 25%, while Lifebuoy – their star soap product grew by more than 50% – bringing revenues of more than €1bn. Ben & Jerry’s had to change its strategy to cater for eating at home, which led to a growth of 17% in comparison to the 20% loss for ‘out of home’ products.

The strategy refresh is based on three core strengths. First, its brand leadership in several categories. The top two brands, Dove and Knorr generated more than €4bn each, with another 13 other brands which generated more than €1bn.

Secondly, there are strong positions in the fast-growing markets. In a chart for analysts and investors showing 10 countries: US, UK, Brazil, the Philippines, Vietnam, Indonesia, India, Pakistan, China, and Turkey, the figures are expected to add up to more than 67% of the global GDP growth during the following decade.

Lastly, its global leadership regarding sustainability. Mr Jope told investors higher growth is targeted by prioritising categories like hygiene, skincare, and plant-based foods which seem to appeal to millennials and Gen Z “There is clear growing and compelling evidence that sustainable business drives superior growth. Measurable brand purpose grows measurable brand power and that in turn drives market share and growth. We see this in our own brands”. 

As one of the most significant companies regarding marketing, Unilever increased its marketing spend by €160m with campaigns like Ben & Jerry’s refugee rights and Dove’s ‘self-esteem. There is a particular focus on the environment. All the company’s plastic will be recyclable by 2025. Its supply chain is targeted to drop to zero net emissions by 2039 and they also want to ensure all their employees will receive a living wage by 2030. US, India, and China account for 35% of Unilever’s current sales – Mr Jope said this will be made a priority for future growth. This led to shares dropping by more than 4%. The business strategy focused on reinstating financial targets and faster growing in areas like high-end beauty and plant-based foods brought the company’s shares to drop to a nine-month low as shareholders became concerned by profitability.

Unilever is aiming to reach an annual sales growth of 3% to 5%, in comparison with 1.9% achieved in 2020 and 2.9% the previous year. Experts see it as a slow-moving, bureaucratic business when compared to more hard-driving rivals like Reckitt Benckiser.

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