Unilever’s Chief Executive Officer, Hein Schumacher has expressed disappointment regarding the company’s performance following the disclosure of declining market share, despite a notable resurgence in sales volumes.
The consumer goods conglomerate, renowned for brands such as Magnum ice cream and Dove soap, reported a 7% increase in underlying sales for the twelve months ending in December, meeting analysts’ projections.
However, total revenue experienced a marginal decline of 0.8%, amounting to €59.6 billion.
Decrease in market share
According to a Financial Times report, the proportion of the market captured by Unilever decreased to 37%, down from 38% in the preceding quarter and a significant drop from 48% in the first quarter of the fiscal year.
This decline was attributed to consumers’ preference for private-label products, particularly noticeable in the European market, leading to a shift away from Unilever’s offerings.
But the company sold more of its goods after a decline in volumes in 2022, as slowing price rises encouraged customers to buy more.
Sales volumes increased 0.2% for the full year, driven by strong growth in Unilever’s prestige beauty and health and wellness divisions, and 1.8% in the fourth quarter, while prices were raised by 6.8%. Shares were up almost 3% in morning trading.
- “Today’s results show an improving financial performance, with the return to volume growth and margins rebuilding,” said Hein Schumacher, who took over from chief executive Alan Jope last year. “However, our competitiveness remains disappointing and overall performance needs to improve.”
He added that inflation would return to normal levels this year — between 2.5 and 3% — with some pockets of deflation in regions like south and southeast Asia but that “we wouldn’t see negative pricing necessarily”.
The group’s profitability inched up in 2023
The group’s profitability inched up in 2023, to an underlying operating margin of 16.7% compared with the previous year’s 16.1%. Underlying operating profit rose 2.6% to €9.9 billion.
Many consumer goods companies have fought to maintain their margins during a period of high inflation and ensuing reduced consumer demand.
Companies raised prices to offset higher costs, but the exercise has revealed the limits of their brand pricing power, as consumers started to push back against ever more expensive groceries and trade down to private label and cheaper goods.
Schumacher has set out to overhaul Unilever’s performance, drive growth and focus on the company’s 30 strongest brands, with the backing of activist investor and board member Nelson Peltz, who started building a stake in the group after its botched attempt to buy GSK’s consumer health division.
- “We are at the early stages of this work and there is much to do but we are moving with speed and urgency to transform Unilever into a consistently higher-performing business,” Schumacher said on Thursday.
At Unilever’s last trading update, the company announced a leadership reshuffle with the appointment of a new chief financial officer, Fernando Fernandez, and new division chiefs in the beauty and wellbeing, ice cream and home care groups.
Mounting challenges
The report noted however, that Schumacher has faced mounting challenges, including an investigation by the UK competition watchdog over Unilever’s green claims, tensions with its ice-cream brand Ben & Jerry’s over its political stance on the Israel-Hamas conflict, and scrutiny over its continued operations in Russia.
On Thursday Unilever said it had reviewed its position in Russia and concluded, “the containment actions we put in place at the beginning of the war minimise our economic contribution to the Russian state”.
As of the end of last year, the company had net assets of about €600 million, including four factories, in the country.
What you should know
Unilever has announced recently that it will sell a group of more than 20 brands including Q-tips, Timotei shampoo and Impulse body spray to private equity group Yellow Wood Partners, the latest in a series of sales of its slower-growth labels.
The disposal of the brands, which were grouped together under the name Elida Beauty in 2021 and generate approximately £700 million in annual turnover, is the first under Unilever’s new chief executive Hein Schumacher, who has set out to streamline the consumer goods giant’s portfolio following investor pressure to boost growth.
