Personal care helps prop up Unilever Q3
conditions in western Europe have hit its third quarter
performance, but figures were buoyed by stronger personal care
sales driven by a particularly robust performance in central and
eastern Europe.
Pre-tax profits for the third quarter fell 4 per cent to €1.45 billion, whereas net profit from continuing operations fell 11 per cent to €1.02 billion. However sales continued to improve reflecting the competitive nature of global markets.
Turnover for the quarter rose by 3 per cent to €10.2 billion, whereas underlying sales grew by 3.5 per cent, an increase on underlying sales for the previous quarter which was 3.3 per cent.
The gap between the sales and profit figures was explained by industry expert John Band, from Datamonitor, "Unilever is down because it has been slower than the others to get out of uncompetitive markets."
Unilever has continued to stick to a five-year plan, started in 2000, aimed at facilitating growth through a sluggish portfolio cull from 1600 lines to 400.
The move was intended to free up resources to allow for an increased marketing budget, but analysts believe the company has been too slow to shake off unprofitable smaller labels.
And the company's unusual structure is cited as a key factor in its inability to change rapidly to meet market demands.
"The difficulty Unilever has had shaking off unprofitable lines may be due to its slightly different structure. It effectively operates as a joint company from the Netherlands and Britain," Band said.
"Many city analysts believe this makes it more difficult to implement changes, whereas Nestlé and Kraft are more centrally managed."
Unilever's portfolio is divided between food and beverage, household goods and personal care - but it is the personal care division that is holding up the fort right now, particularly in the troublesome European market.
The company reported growth across all of its main personal care categories, which was driven by a strong performance in Central and Eastern Europe. Recent new launches in the category have included Rexona sport deodorants, Axe shower gel and Sunsilk styling products.
In the Americas, where a better retail environment is provided underlying sales growth of 5 per cent for the quarter, the company highlighted that strong growth in the personal care category came from a good response to new market initiatives.
The company said that in the US the extension of the Dove brand into a 'cool moisture' range of hand and body creams was well received, as was Axe deodorants extension into body creams.
Unilever is now trying to strengthen its product identity with a new logo on all of its consumer packaging. However, as the P&G merger with Gillette is due to knock Unilever off its position as the world's largest consumer goods group, competition is about to get even hotter.
