Unilever: Recovery in US economy is mixed and slow

By Elaine Watson

- Last updated on GMT

The US grocery market will remain 'difficult' for the forseeable future, predicts Unilever: "The overall market grew not more than 2% in value with negative volume  [in Q1, 2012]."
The US grocery market will remain 'difficult' for the forseeable future, predicts Unilever: "The overall market grew not more than 2% in value with negative volume [in Q1, 2012]."

Related tags: North america, United states, Developed country

Conditions will remain difficult in the US food and beverage market, despite periodic glimmers of hope, bosses at Unilever have cautioned.

The consumer products giant, which has just posted first quarter 2012 sales figures described by analysts as “impressive​” in the current economic climate, said growth in North America (where underlying sales were up 5%) was all driven by price, not volume.

Speaking to analysts on a conference call yesterday, head of investor relations James Allison said: “Once in a while over the last three, six, months, there have been some positive signs overall when it comes to the US economy."

This continues to be a difficult market

But he added: “But let me tell you, recovery is mixed and slow. The overall market grew not more than 2% in value with negative volume. So this continues to be a difficult market, and that's also our assumption going forward.

“While we are pleased with the overall performance of North America, if I look at the numbers, it's all been through price and has been somewhat but slight negative volume.”

However, on the plus side, Unilever’s volumes were declining “at a lesser rate than the overall market​”, he observed.

“We just give you the soundbite. 13% of the population, 45 million Americans are getting food stamps. I think that really brings home the overall macro context.”

‘Life is difficult’ in US out of home ice cream market

In ice cream, he said, “life is difficult out of home, but we're driving innovations with what we've been doing in Magnum”.

In the US food division overall he added, “There are some parts that are doing very well in savory and the like. There are others where, such as spreads, we've been quite aggressive last year with pricing. And obviously, while competitors have reacted, they haven't to the same extent.”

Commodity prices: The volatility is pretty intense

Asked about commodity prices, chief financial officer Raoul Jean-Marc Sidney Huet said: “On input costs, the volatility is pretty intense.​ [But] if you look at crude oil, specifically Brent, you will see that they ​[prices] remain stubbornly high, as well as volatile.”

Unilever expects commodity cost inflation for the full year to be “slightly higher than the mid-single-digit increase we indicated at the beginning of the year”,​ he added.

“This is mainly a function of the increase in crude oil-related prices, as well as vegetable oils.”

Analyst: ‘Unilever is generating decent growth in both developed and developing markets’

UK-based analyst Graham Jones at Panmure Gordon said Unilever’s performance was “impressive​” in the circumstances, adding: “While the macro environment clearly remains difficult and cost headwinds persist, Unilever is generating decent growth in both developed and developing markets, and across its range of categories.”

Emerging markets (which account for 56% of sales) grew sales by 11.9%, while developed markets saw 4.2% growth. North America posted 5% growth and Latin America 10.9% growth. Europe grew by 5.1% boosted by an early Easter and weak comparatives.  

Related topics: Suppliers

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