Unilever shares rise as sales beat estimates amid turnaround plan to regain market share

08 Feb 2024 --- Unilever sees year-over-year profits in its fourth quarter drop less than expected to €6.43 billion (US$6.92 billion). Sales also increased 4.7%, helping to send its stock price higher on the London Stock Exchange after both metrics beat analyst estimates. 

Unilever tells Personal Care Insights it continues to “reshape the portfolio into premium segments through selective bolt-on acquisitions and divesting lower-growth businesses.” 

In a company statement, CEO Hein Schumacher points to an improving financial performance thanks to volume growth and the rebuilding of the margins but admits “competitiveness remains disappointing” with more work needed to drive overall performance.

Last year, Unilever faced challenges in winning market share with shoppers selecting private, often cheaper supermarket brands to cope with high inflation.

“We have increased investment behind our 30 Power Brands, accelerated portfolio transformation, and are driving a sharper performance focus with clear and stretching targets across the whole organization. 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,” says Schumacher.

Growth Action Plan progress
Last October, Unilever launched its Growth Action Plan to create high-quality growth and boost productivity. Schumacher says during the fourth quarter, the new leadership team “embedded the plan at pace” across the company, in part, by concentrating on faster growth initiatives that include:

• Focusing on 30 Power Brands, which represent about 75% of revenue with underlying sales growth of 8.6% in 2023 and 6.5% in the fourth quarter.
• Driving brand superiority with a new quantitative methodology to measure brands’ consumer appeal across multiple dimensions.
• Scaling multi-year innovation with programs already identified to drive market development and premiumisation.
• Increasing brand investment and returns to boost competitiveness.
• Continue to reshape portfolio after recent acquisitions of Yasso and biotech hair care brand K18 while disposing of Elida Beauty, Dollar Shave Club and Suave.

Offloading non-core brands
Late last year, Unilever sold the Elida Beauty division and brands, including Q-Tips and Pond’s, to private equity firm Yellow Wood Partners.

Unilever told Personal Care Insights the deal was part of Schumacher’s plans as new CEO to sell off non-core beauty and personal care brands to bring focus back to higher-growth initiatives.

Unilever says it is on pace to create high-quality growth and boost productivity as part of its Growth Action Plan.Earlier in the year, Unilever also dealt with Yellow Wood, selling the longstanding American hair care brand Suave, which debuted in the 1930s as an alternative to salon-quality brands.

Yellow Wood Partners’ co-founder Dana Schmaltz told us that in both cases, his firm saw an opportunity to purchase brands that, as part of an FMCG company’s portfolio, were not “getting as much attention as, quite honestly, we believe the brand[s] deserved, so we saw the opportunity to grow the brand[s].”

Boost in Beauty and Wellbeing
Unilever’s report showed more robust performance in Personal Care, Beauty and Home Care divisions, while ice cream and other food products showed slower growth. Unilever outlines three priorities to driving ‘unmissable superiority” of brands in the Beauty and Wellbeing category:

• Elevate core Hair Care and Skin Care brands to increase premiumisation
• Fuel growth of Prestige Beauty and Health & Wellbeing with selective international expansion
• Continue to strengthen beauty and well-being capabilities

Unilever says the Beauty & Wellbeing category delivered a “strong full-year performance”, with underlying sales up 8.3% and volume growth accelerating to 6.3% in the fourth quarter. It also reported good volumes in Hair Care and very strong volumes in Health & Wellbeing.

Soon after selling its Elida Beauty division, Unilever purchased the “premium” biotech hair care brand K18 to complement its “fast-growing portfolio of premium, culturally relevant consumer brands.”

Personal Care performance
The company says it is focused on science-led brands for consumers across Deodorants, Skin Cleansing, and Oral Care with the following priorities:

• Developing superior technology and multi-year innovation platforms
• Leveraging partnerships with customers
• Expanding into premium areas and digital channels

According to Unilever’s report, Personal Care grew underlying sales by 8.9% for the year, with growth balanced between price and volume, underpinned by continued strength in Deodorants. The company says all three categories drove positive volumes in the fourth quarter.

Its deodorant brand, Axe (Lynx in the UK), grew a “high-single digit” following the launch of its new fine fragrance collection. Unilever told us it wanted to “create an affordable, high-end range of scents that appeals to Gen Z consumers.”

As Unilever seeks to regain market share amid inflationary pressures poised to pull back, the company expects underlying sales growth for 2024 to be within its multi-year range of 3% to 5%, with “more balance between volume and price.”

By Anita Sharma