business

Unilever Turns to New Shower Foams, Lotions Amid Price Squeeze

Updated on
  • Consumer giant says new product lines fuel sales growth
  • Company says review of dual headquarters to be finished soon
Unilever CEO Paul Polman discusses the company’s 2017 earnings.

Unilever is rolling out new products such as Dove shower foam to boost sales as it struggles to raise prices on longtime mainstays like Hellmann’s mayonnaise.

The Anglo-Dutch consumer-product giant introduced five new brands in its personal-care division last year, including Hijab Fresh, a hand and body lotion aimed at Muslim consumers, and soaps formulated for babies. That helped it drive sales growth that beat analyst expectations in the fourth quarter, even as price increases fell short.

“We do see that higher-volume, lower-pricing mix persisting, especially in the first half,” Chief Financial Officer Graeme Pitkethly said in an interview.

The results close out a tumultuous year for Unilever in which the Anglo-Dutch company rebuffed an unsolicited takeover bid from Kraft Heinz Co., sold its struggling margarine brands to private equity firm KKR and lifted its forecasts for cost savings and profitability to compete with rivals who’ve increased earnings faster.

Unilever expects revenue growth of 3 percent to 5 percent this year as U.S. tax cuts boost global economic expansion, Chief Executive Officer Paul Polman said in a Bloomberg TV interview.

Underlying sales rose 4 percent in the fourth quarter, Unilever said Thursday, above analyst expectations. That came as underlying prices rose only 0.7 percent, held back by deflationary pressure in the U.S., emerging markets and European countries where discount grocers are making gains. E-commerce sales doubled to about 2 billion euros ($2.5 billion) for the full year, Pitkethly said.

“Unilever is taking the biggest steps in the industry to increase the agility of its business model, reduce costs, embrace digital and e-commerce and future-proof its portfolio,” Berenberg analysts led by James Targett said in a note.

Price Pressure

Pricing remains under pressure in inflationary markets such as Argentina and Brazil, Pitkethly said, while in India the company is passing on the benefits of tax savings to consumers through price cuts. In Germany and France, retailers are lowering prices to keep pace with budget supermarket chains. In the U.S., Hellmann’s is winning a battle for mayonnaise market share against Kraft Heinz through discounting, Pitkethly said.

The shares slipped 0.5 percent Thursday morning in Amsterdam.

The company has also said it’s seeking to scrap its dual-headquarters structure and settle on a single location in the U.K. or the Netherlands. The review is likely to be completed in the coming weeks, Polman said.

Unilever has appointed headhunter Egon Zehnder to help find a successor to Polman, who took the helm almost a decade ago and has sought to align the company’s revenue growth with social impact.

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