Unilever CEO says emerging markets will take the lion’s share of future sales

By Simon Pitman

- Last updated on GMT

Related tags: Personal care, Developed country, Investment, Unilever

Having already tailored its business increasingly around personal care, Unilever CEO Paul Polman says the company is hoping to eventually derive most of its sales from emerging markets.

Speaking in an interview with Reuters news agency, Polman underlined how the developing markets would be accounting for an increasingly small proportion of growth, as revenues from emerging markets continue to go from strength to strength.

“Europe and the US will be, for the next 10 years, low-growth territories, I’m afraid. So, soon we will have 75 percent of our turnover in emerging markets…. 70 – 75 percent by the end of the decade,”​ Polman stated in the interview.

Growing consumer base in emerging markets

Polman cited growing populations should soon add another 2 billion consumers in the emerging markets, suggesting that this would also form the basis of further demand for the company’s products targeted in those markets.

The news follows the big trend of the last two years, whereby the major international cosmetic and personal care players have all reported booming sales in emerging markets, while the developed markets, particularly the US and Europe, have stalled under economic pressures.

Indeed, the five biggest players in the world, which includes Unilever, as well as Procter & Gamble, Beiersdorf, L’Oreal and Shiseido, all reported sales growth weighted towards the emerging markets for the most current financial results, most commonly in the Asia Pacific and Latin America regions.

Emerging markets could soon account for three quarters of sales

Currently the company claims that 53 per cent of its annual €44bn is derived from emerging markets - €17.7bn in Asia Pacific, €14.6bn in The Americas and €12.0bn in Europe.

In the Reuters interview, Polman stated his belief that the company is continuing to grow its revenues at around 10 percent per year in emerging markets, and said that this would help fuel overall annual growth rates of 4 – 6 percent, well ahead of the industry average.

Last week analysts at investment bank Liberum Capital said they expect Unilever to sell its food arm, excluding the ice cream and beverage category, for an estimated figure of €14bn in an effort to grow its home and personal care business.

Speculation over sale of food business

The analysts speculate that any such deal would be used to fund a large acquisition in its home and personal care businesses, according to a Liberum Capital report, which underlines why now is the right time to buy Unilever stock.

Authors Pablo Zuanic and Lisa Hau said: “We expect Unilever at some point to implement a large accretive acquisition in the HPC (household and personal care) space and to partly fund it by selling it’s the Food unit (excluding ice cream and beverages) which we estimate can be sold at about one times sales (or €14bn).

“Selling this lower growth component would improve the company’s growth profile but at the same time, a deal in HPC would likely increase the company’s franchise strength in the category (potential targets: parts of Clorox; Colgate; Beiersdorf; and or a cosmetics company).”

Related topics: Business & Financial

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