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New rivals forcing Unilever to launch new products and restructure

Anglo-Dutch consumer goods maker Unilever has announced to its investors that it expects new products and a leaner organization to help win an intensifying battle to sell packaged goods around the world.

The maker of Dove soap and Knorr soup, which is under huge shareholder pressure since rebuffing a $143 billion takeover bid in February from Kraft-Heinz (KHC.O), posted an unexpected slowdown in sales last month, citing lost market share to smaller rivals.

The company’s 20 billion-euro-a-year personal care business, often seen as its most attractive, posted only 2.4 percent growth in the first nine months of the year, but the unit’s president, Alan Jope, said it should be back above four percent soon.

“I‘m not going to give an exact date,” Jope said during an investor event in New Jersey that was broadcast online. “But I don’t think I’d be standing here with this tone and this cocky, relaxed position if it wasn’t going to come around quite soon.”

In explaining the slowdown, Jope pointed to lower growth of the global market, weakness in Indonesia and Brazil – two of its big markets – and increased competition from local rivals, such as Patanjali in India and Wardah in Indonesia.

While the first two issues were temporary, Jope said local competition was a long-term phenomenon, and largely why Unilever was focusing on increasing its agility in local markets.

He cited several new brands that would aid the unit’s growth going forward, including prescription-strength Dove products for people with psoriasis or eczema; Skinsei, a personalized, subscription-based skincare regimen sold directly to consumers; and a beauty brand called Love Beauty and Planet.

Over the past two years, Unilever has worked to make the most of its global scale in areas where it counts, like back-office functions and procurement, and to be quicker with new products targeted for local markets.

Unilever officials have cited this new structure for being able to launch a low-calorie, high-protein Breyers ice cream in the United States in only five months, capping the damage done by the start-up Halo Top, which quickly gained market share.

Another reason for the new structure is costs, and Unilever reiterated its targets for savings of six billion euros by 2019, two-thirds of which will be reinvested into the business, and a 20 percent operating margin by 2020.

Over the next few years Unilever expects to generate more of its sales from alternative channels like health and beauty stores, delivery services and online. It is launching new products to suit those channels and pursuing partnerships with firms like Just Eat (JE.L) and Deliveroo to expand distribution.

The company said it is nearly done with the stock buyback plan it announced in April soon after the Kraft approach, and its plans to dispose of its spreads business were progressing well.

Reuters reported earlier that the auction process for the business, which could be worth more than $7 billion, has narrowed to three bidders.

Unilever has also mentioned that it favoured collapsing its dual-headed, Anglo-Dutch structure into a single entity, but delayed a decision whether it would be based in Britain or the Netherlands, avoiding for now a choice with political dimensions amid on-going Brexit negotiations.

Source: Reuters


Cochin Herald

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