Chris Hughes is a Bloomberg Gadfly columnist covering deals. He previously worked for Reuters Breakingviews, as well as the Financial Times and the Independent newspaper.

Eight months after fending off a takeover attempt by Kraft Heinz Company, Unilever NV has delivered another set of numbers showing how hard it is for large consumer companies to grow. To stay independent, Unilever will need to be more aggressive in doing takeovers itself.

The Anglo-Dutch consumer goods group increased sales by 2.6 percent in the third quarter. That's roughly in line with its markets. It should be outperforming. Unilever used to grow faster than 60 percent of its markets, now that figure is down to half. Sales in developed markets fell 2.3 percent; those in emerging markets rose 6.3 percent.

Taste Test
Unilever has done better than its sectors over the past year
Source: Bloomberg

Weather and natural disasters didn't help. But management is open about the performance not being good enough, echoing yesterday's comments from Reckitt Benckiser Group Plc. Unilever has lost competitiveness in some markets -- sometimes to price-cutting multinational rivals, sometimes to smaller new entrants that are better at gauging local tastes, especially those of millennials. In the U.S., Unilever ceded share to Halo Top high-protein, low-calorie ice cream.

The trends aren't new but investors had thought Unilever might do better, and marked the shares down 4 percent, their biggest drop since Kraft's retreat in February. The stock trades now on 20 times next year's forecast earnings, a slight discount to peers Nestle SA and Procter & Gamble Company.

Baby Steps
Unilever's valuation isn't far away from its highest-rated peers
Source: Bloomberg
Note: Valuation multiple vs forecast earnings for next full year

It's tempting to see this as evidence that Unilever is a big dinosaur that can't adapt to a sudden change in its environment, where scale and global reach are no longer advantages. If that were true, its fate would be to fall to a renewed assault by Kraft, which would try a different strategy based on aggressive cost cuts.

But Unilever's strategy deserves time. It is giving autonomy to local teams so they can be more agile in spotting local trends and innovating. It has stepped up M&A too, buying in products that others have pioneered.

There's no doubt that smaller new rivals have first-mover advantages that make them more competitive locally. But Unilever's international network, marketing clout and intelligence should give it a second-mover advantage when it fights back, as it did with a new ice cream to rival Halo Top.

Unilever has spent 8 billion euros ($9.5 billion) on acquisitions that have provided 2 billion euros of added sales since 2015. These are growing at 16 percent on a like-for-like basis, the company claims. The deals were done at seemingly heady multiples. Yet given the potential for more sales when plugged into a global network, Unilever can make them pay.

Investors generally prefer companies to be bought than to buy. They should make an exception for Unilever.

This column does not necessarily reflect the opinion of Bloomberg LP and its owners.

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Chris Hughes in London at

To contact the editor responsible for this story:
James Boxell at