Unilever - Driving Sustainable Growth
Unilever is one of the world’s leading suppliers of consumer goods, with annual sales of more than €50bn from categories including Beauty & Personal Care, Home Care, and Foods & Refreshment.
The company has a strong portfolio of leading global brands, 12 of which have sales of more than €1bn a year. Most of the products are low-ticket, repeatable purchases, with 2.5bn consumers using a Unilever brand every day. When you reach for indulgent ice creams (think Ben & Jerry’s), affordable soaps that combat disease (think Lifebuoy and Dove), luxurious shampoos (think TRESemme )or everyday household care products (think Domestos), there’s a good chance the brand they pick is one of Unilever’s.
With unique routes to market, Unilever has an unrivalled emerging market presence and generates more than half of its sales from those parts of the world expected to experience strong long-term growth in demand for consumer goods.
The diversified nature of the group’s portfolio has protected Unilever during the COVID-19 pandemic, with increased demand for hygiene products and brands used in the home making up for lower sales of products used outside the home. Furthermore, the business is defensive, with a range of mass market (or value) products that should hold up well during a period of subdued global economic growth as consumers trade down the lower cost brands.
In recent years, Unilever has become less complex and more responsive to fast-changing consumer trends. We note that as the pandemic spread, the group launched Lifebuoy in 50 new markets in just 100 days. With consumer interest in hygiene and sanitation unlikely to reverse, Unilever, as the world’s biggest soap company, will continue to benefit from this expanded sales footprint for years to come.
Marketing has also become more efficient, with 40% of spend now directed toward digital channels which have a higher return on investment. As a result, the group has been able to keep up with recent trends such as the growth of natural products and premium brands.
Unilever entered the COVID-19 crisis with a strong balance sheet and has not needed financial support from any government. In contrast to many companies in the FTSE 100, the group has continued to pay its dividend, cementing a track record of increasing its payout by 8% on average every year since 1979.
Since its formation in 1930, Unilever has been owned through two separately listed companies, a Dutch NV and a UK PLC. However, the group is now planning to unify its legal structure under a single parent company, Unilever PLC, to create a simpler business with greater strategic flexibility that could potentially lead to a transformational deal at some point.
Finally, as consumers (and investors) search for brands and companies that behave in the best interests of the planet, Unilever is playing its part in making the world a better place by driving positive change and sustainable growth throughout its business. Most recently, the group announced it is replacing ingredients derived from fossil fuels in its cleaning and laundry product formulations with ingredients from renewable or recycled sources by 2030.