'A tangible sense of self-belief and optimism’: Fewer, faster, better mantra is paying off for Unilever, says analyst

In a note covering Unilever’s recent three-day investor event in Paris, Graham Jones, a UK-based analyst at Panmure Gordon, said the event in “showcased a company with a tangible sense of self belief and optimism”. ​

While bosses remain pessimistic about the macro-economic outlook, ​they have a “tangible sense of self belief and confidence about Unilever’s target to double sales from €40bn”, ​he observed, noting that Unilever is already set to top the €50bn revenue mark this year.

A new ‘less is more’ philosophy has been key to its turnaround, he said, pointing out that in 2012, Unilever is working on just 600 innovation projects, compared with 5,000 in 2005. And it will cut this number by a further 40% in 2013.

In 2013, Unilever has twice as many €50m projects in the pipeline ​

At the same time, the speed with which new products are being rolled out to market has risen rapidly, he said.

“In 2005, only eight innovations had been rolled out to 10+ countries within a year of launch​ [whereas] in 2012 Unilever had 90. ​

“In 2013, Unilever has twice as many €50m projects in the pipeline, and is aiming for 30% faster roll-out. This has been supplemented by much better execution with retailers, including an 800bp improvement in on-shelf availability.“​

Magnum has just become a €1bn brand  ​

The changing fortunes of premium ice cream brand Magnum - which has just become a €1bn brand - are “illustrative of the change that has taken place in Unilever​”, claimed Jones.

“From 2000-2007 Magnum delivered just 1.8% compound annual growth rate (CAGR) in sales, but from 2008-2011 the CAGR has been an impressive 10.9%. ​

“This has driven better refreshment category growth while home and personal care growth has also accelerated, leaving just Food ​[c.27% of group sales] as the laggard. ​

“However, even here the mix is changing significantly, with 28% of sales coming from emerging markets in 2007 having increased to 39% now. So even in Food, we see reason to be more confident going forwards.” ​

Our foods business continues to grow more slowly​

Underlying sales growth in North America dipped 3.5% at Unilever in the third quarter of 2012, although overall revenue was up 10.3% driven by strong sales in emerging markets and a better performance in key European markets such as the UK.

Speaking to analysts on the Q3 earnings call in late October, executive director and chief financial officer Jean-Marc Huet said: “We think that these are a solid set of results, demonstrating in particular the continuing strong momentum across emerging markets and Home and Personal Care.”​

But he added: “Our foods business continues to grow more slowly, partly reflecting a footprint more skewed to the developed markets and partly reflecting some decline in our spreads business, where our prices have not been sufficiently competitive.”​

Ice cream delivered another strong quarter of underlying sales growth ​

In Foods, overall Q3 underlying sales growth was - 0.4%, impacted in part by sales brought forward in Q3 of 2011, he said.

Beverages growth improved in the quarter “but still lags market growth​”, while ice cream saw positive volume and price, with underlying sales growth of 8%.