Speaking in an interview recently published by Germany’s WirtschaftsWoche magazine, chief executive Paul Polman blamed the falling income levels among consumers for the reducing demand for brand-name items.
"If markets such as those in Europe don't grow any more because people have less real income available, we still must find a way to make our product lines available," he said.
"And that means that we need to cut costs now and also close factories if the need is no longer there," he stated.
Developed markets are now a tough environment for the consumer goods sector, due to the hostile factors of high competition, increasing globalization, and anticipated volatility in the dollar/pound exchange rate over the coming years.
In Europe, a recent study by research firm CompaniesandMarkets.com predicted that industry revenue will increase at an underwhelming compound annual rate of 0.6% from 2014-19 - down from 1.2% from 2009-14.
Revenue is also expected to contract from 2013-14 by 0.8%, due mainly to an anticipated reduction in demand from the 15-44 female age group.
Unilever’s long term concern
This is not the first time Unilever has voiced its concern for the state of developed markets.
Speaking at the end of last year, at a reception for the World Wildlife Fund Duke of Edinburgh Conservation Awards, Polman stated that the slowdown in growth in developed markets is likely to stay for the longer term.
“They are still relatively stronger economies [than emerging markets], but still fragile,” Bloomberg reported Polman as saying.
The CEO also noted that multinationals could no longer rely on the now-slowing emerging markets to offset stagnant sales elsewhere, particularly in Europe and the US.
“It will only be corrected if some of the reforms have been made in these places,” Polman stated at the time.
In divesting 100 brands, rival FMCG giant Procter and Gamble recently made its own moves to combat the slowdown, Euromonitor International observes.
“By focusing on key brands only, Procter and Gamble is attempting to stay relevant in developed economies where markets are often saturated,” confirm analysts with the research firm.
“P&G has fallen by the wayside in emerging markets and the divestment is a way to focus more attention to a select few brands in these economies,” they note.