Unilever Looks To Personal-Care Innovation, Improved “Agility” In FY 2014
This article was originally published in The Rose Sheet
Executive Summary
Unilever reports a 3% decline in FY 2013 turnover, but underlying sales growth was ahead of market, the firm says, crediting strong innovation in personal care and successes in emerging markets, among other factors. Going forward the firm aims to create efficiencies via SKU reductions and other streamlining efforts.
Unilever PLC expects growth in its business to come from continued innovation in personal care, expansion in developing markets and streamlined efforts for improved “agility and speed,” among other factors, CEO Paul Polman indicated during a fourth-quarter and full fiscal 2013 earnings call Jan. 21.
The firm’s turnover declined 3% to $49.8 billion (€36.9 billion) in fiscal 2013, with foreign exchange and net acquisitions and disposals weighing down results. Polman characterized 2013 as the most challenging of the last five years as growth slowed in emerging markets and developed markets remained “weak with little sign of any overall improvement.”
He highlighted Unilever’s underlying sales growth of 4.3% for the year, reflecting 8.7% growth in emerging markets, noting that about 55% of the firm’s business gained market share in fiscal 2013. Fourth-quarter sales were up 4.1% to $15.99 billion (€11.8 billion), including 8.4% growth in emerging markets.
Unilever will continue to pursue opportunities for its brands in emerging markets around the globe. CEO Paul Polman cited Africa as “a big opportunity” that will be targeted for investment as stability in the region improves.
Given the “increasing volatility and uncertainty of today’s world,” Unilever is working to improve its agility and speed, according to Polman, who cited “a premium on moving fast.”
“There is still too much complexity in the business that is not adding value and, finally, slowing us down. It also results in incremental cost that is better spent building our brands and innovations,” the exec explained.
Under an initiative called Project Half launched in 2013, Unilever aims to reduce its SKUs by 30%, and “once we have done that, we will go after a further 10%,” Polman said. In July 2013, the firm reported that it had trimmed about 20% of its portfolio, which includes home and food products in addition to personal care (Also see "Unilever Innovation, Speed To Market Drive Q2 Gains In Personal Care" - HBW Insight, 5 Aug, 2013.).
Unilever also has identified “a lot of duplication effort in managing our product formulations and the specifications of our ingredients and packaging in multiple systems,” according to the CEO.
The firm is implementing a single system to manage all such information across the full life cycle of its products, “from initial design to the changes and improvements we make once in market, which will allow us to significantly increase productivity and reduce head count,” Polman said.
Personal Care “Fit To Win”
With six billion-dollar brands and marked consistency in its performance, Unilever’s personal-care business is “fit to win,” Polman said during the call.
Unilever Personal Care booked sales of $18.1 billion for the year, representing underlying growth of 7.3%, according to the firm’s Jan. 21 release.
Polman identified hair care as a key piece of the company’s business that drove personal-care growth in fiscal 2013. “Hair care is such a big business that if that doesn’t grow, our personal-care business wouldn’t put in these performances,” he said.
He identified Dove Repair Expertise among standout launches for the year. Building on a triple-action smoothing system to smooth and protect hair, the line rolled out to more than 50 markets in 2013, according to Polman (Also see "Unilever Innovation, Speed To Market Drive Q2 Gains In Personal Care" - HBW Insight, 5 Aug, 2013.).
The introduction of a Keratin Smooth line under Unilever’s TRESemme brand also helped propel growth. Designed to provide “instantly smooth styles and frizz control that lasts up to 48 hours,” the line is marketed as salon-quality hair care for use at home (Also see "New Hair Care In Brief" - HBW Insight, 25 Mar, 2013.).
Polman noted that some analysts were skeptical about Unilever’s $3.7 billion acquisition of Alberto-Culver in 2010, believing the firm may have overpaid for the company, which fattened its portfolio with TRESemme, Nexxus “super-premium” hair care and skin-care brands St. Ives and Simple.
However, the purchase “nearly has paid out” since the acquisition closed in 2011, according to Polman.
TRESemme’s launch in Brazil has been a “tremendous success,” and the brand also is gaining traction in India and Thailand following recent debuts, the exec said.
Meanwhile, Unilever’s Lux hair products re-launched in Japan and China with solid initial results, Polman said.
On the skin-care side, Vaseline Spray and Go lotions, which “moisturize deeply and absorb in seconds to leave skin instantly soft, not greasy or sticky,” and Dove Men+Care facial products are generating gains for the company.
In its release, Unilever also highlights its Pond’s Luminous Finish BB+ Cream with SPF 15 sun protection as an offering that is making good progress, while the firm’s Pond’s Men range of facial cleansers and moisturizers is “leading the development of the male segment” in Asian markets including Indonesia and Thailand.
Going forward, Unilever will continue to pursue opportunities for its brands in emerging markets around the globe. Polman cited Africa as “a big opportunity” that will be targeted for investment as stability in the region improves. Unilever also is eyeing growth in rural India, Indonesia and underpenetrated regions of Brazil, he said.
Unilever Sales Results
- Fourth-quarter sales were up 4.1% to $15.99 billion
- Fiscal 2013 sales dropped 3% to $49.8 billion
- Fifty-five percent of business gained market share in fiscal 2013
Focus On High-Impact Launches
Unilever enters fiscal 2014 with the enduring strategy of launching fewer – but bigger – innovations.
Polman stated: “In 2013 again, around 70 of our innovations went to 10 countries or more, and it has now become normal to see innovations going into 50 or more countries like the Dove Repair Expertise range.”
The AXE Apollo collection of deodorants, body washes and hair products was another that rolled out on that scale, backed by a strong multimedia campaign touting the variant as “the biggest product launch in [the brand’s] 30-year history (Also see "In Brief" - HBW Insight, 21 Jan, 2013.).
Unilever also will continue to invest actively in digital marketing, spend for which increased 20% in 2013 and now accounts for 17% of the company’s overall advertising commitment. Polman pointed to the viral hit “Dove Real Beauty Sketches” as an example of the firm’s recent digital work.
While economic challenges are expected to continue, Polman offered an optimistic outlook for fiscal 2014, projecting “volume growth ahead of our markets, steady and sustainable core operating margin improvements and strong cash flow.”