Brett Girard discusses Unilever
COVID-fueled demand for hygiene products and comfort foods is helping Unilever and other consumer-product giants bounce back from years of sluggish growth.
The maker of Ben & Jerry’s ice cream and Lifebuoy soap reported a 4.4% increase in underlying sales for the third quarter, more than double the consensus analyst forecast.
The strong performance echoes results from other makers of food and cleaning products, with Procter & Gamble Co. earlier this week raising its earnings forecast and Lysol maker Reckitt Benckiser Group Plc saying revenue through 2020 will increase by the most in at least a decade. Nestle SA reported strong sales of Purina pet food.
Unilever shares gained 1.2% in early London trading.
Although the pandemic and lockdowns have caused the worst economic downturns in recent memory and hit companies hard in industries ranging from airlines to restaurants, stay-at-home edicts have revived demand for staples that had fallen out of fashion.
For the past decade, the likes of Unilever, Reckitt Benckiser and Nestle struggled as shoppers shifted toward niche food brands while favoring private-label or discount cleaners. The pandemic has changed that as consumers stock up larders and scrub down bathrooms.
Underlying sales of Unilever’s skin-cleansing products increased almost 20%. Growth was supported by Dove’s entry into the antibacterial segment, and the extension of Lifebuoy into new formats.
“We’re investing heavily in marketing our brands and behind innovation tailored to the changing environment as consumers learn to live with Covid,” Chief Executive Officer Alan Jope said on a call.
Lifebuoy is now one of about a dozen brands in the company with revenue of more than 1 billion euros ($1.2 billion) after Unilever introduced it in more markets such as the U.K., where it’s advertising the product with free hand sanitizer stations at Tesco Plc supermarkets.
Shoppers also stocked up on germ-killing products as the company cut prices in its home-care division. Unilever started selling Domestos bleach in China and a new Omo laundry detergent in Latin America.
Before the pandemic struck, Unilever and Nestle moved to revamp their portfolios, with the Swiss company shedding its U.S. confectionery arm while the Marmite owner sold its spreads business. Unilever is also conducting a review of much of its tea unit as demand slows.
The company has moved to consolidate its headquarters in the U.K., ending a cumbersome Anglo-Dutch structure that has made major merger-and-acquisition activity more complicated. Unilever doesn’t immediately envision significant deals, Jope said.
Growth in Unilever’s food and refreshments arm was held back by restaurant closures, but the unit was boosted by at-home consumption of ice cream and other packaged goods.
Consumers stocked up at supermarkets and online, with Unilever’s e-commerce business growing 76% in the quarter, with revenue of about 3.7 billion euros.
Growth in Latin America was strong, in part due to cash payments the Brazilian government handed out to communities in need, Chief Financial Officer Graeme Pitkethly said on a call with reporters. That support is expect to taper off slightly in the fourth quarter.