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Mixed progress for Unilever since 2007 - analyst

By Rod Addy , 29-Aug-2012

Mixed progress for Unilever since 2007 - analyst

Unilever has shown mixed progress over the past five years, according to Andrew Wood, senior research analyst for food and home & personal care products at Sanford C Bernstein, based on its predictions for the company made in 2007.

The consumer goods multinational, whose brands include Magnum ice cream; Knorr cooking sauces; Pot Noodle and Marmite had performed well against competitors in the food and drink market, said Wood.

“Unilever had consistently grown below its major global peers and been a ‘donor’ of market share,” he said. “But comparing sales growth from 2001-2005 to 2006-2010 to 2011 highlights how Unilever moved up the ranks against its peers in food (number nine to eight to six) ...

“After chronic global share losses from 2002-2008, Unilever has gained share in each year from 2009-2011, including in Western Europe. We expect Unilever to continue to gain share and grow ahead of its [food and non-food] categories but ... it must continue to drive innovation and invest back into its business and continue its aggressive and dynamic business style.

The firm had been “gun shy” of mergers and acquisitions following its purchase of BestFoods and Slim-Fast in 2000. However, Wood said capital expenditure appetite had recovered since then.

Biggest areas for improvement

One of the biggest areas for improvement lay outside of food in operating profit margins for home & personal care products, he said.

By focusing on organic growth; mergers and acquisitions in emerging markets and home and personal care, Unilever had driven considerable category growth.

The company had also adopted a more transparent and informal and less defensive communications style and become less bureaucratic and more dynamic, said Wood. “Aided by organisational changes initiated by former chief executive Cescau and driven by fresh, dynamic external hires (including chief executive [Paul] Polman) ... Unilever has become a nimbler and more dynamic company.

“We believe this is a big factor in the enhanced operating performance ... but management must not become self-satisfied or complacent.”

He concluded that “Unilever has now positioned itself to deliver strong and consistent operating performance into the medium term”.