Unilever Chief Executive Officer Paul Polman said Europe is facing 10 years of economic stagnation while the U.S. grapples with the rise of an “emerging poor” class dependent on government benefits.
“We are in for at least 10 years of slow economic growth in Europe, and I don’t see that changing,” Polman said in an interview yesterday at Bloomberg’s New York office. “If you run a business like mine and don’t assume that, you are fooling yourself. I hope for the benefit of Europe I am proven wrong, but even then we are in a better position by taking that as our starting point. The key thing is to see reality in the eye.”
Polman said declining consumer confidence in the U.S. has “people worried” and the recovery in the world’s largest economy will be muted, with 2 percent growth in gross domestic product “if you’re lucky.” With 46 million people relying on government benefits to buy food, “people scrape by until the end of the month,” the executive said.
The maker of Axe body sprays and Hellmann’s mayonnaise generates about 16 percent of its 50 billion euros ($65 billion) in annual sales in the U.S. and about 25 percent in Europe, according to estimates from analysts at Berenberg Bank and RBC Capital Markets. About 55 percent now comes from emerging markets such as Indonesia, China and Brazil.
Unilever fell 0.1 percent to 29.43 euros at 10:08 a.m. in Amsterdam trading. The stock has gained 11 percent this year, compared with 13 percent for competitor Nestle SA.
The London- and Rotterdam-based company has adapted to deteriorating economic conditions by cutting costs, expanding in emerging markets and pushing lower-cost brands such as Suave shampoo, according to Polman.
Unilever in October reported third-quarter revenue growth that beat analysts’ estimates and industry peers. The performance was in spite of a “continued high level of competitive intensity, depressed economies and increasing global imbalances and uncertainty,” Polman said at the time.
In Europe, sales rose 0.9 percent in the third quarter, an improvement over the 2.2 percent decline in the second quarter. Unilever has offered lower-priced products in Greece to meet the needs of cash-strapped consumers, while its business in Spain has “stabilized,” Chief Financial Officer Jean-Marc Huet said.