After steadily shedding food brands over the past few years, Unilever P.L.C. said it is now ready to recover its position in the category.
“The actions we’ve taken so far have stabilized performance, and we are ready to accelerate food beyond the 1.5% per year on average that we’ve done over the last five years,” said Paul Polman, chief executive officer, during a Jan. 21 call with financial analysts to discuss fiscal 2013 earnings. “Food remains a highly cash-generative business, and as our portfolio increasingly focuses on our big global brands and a clear way forward for spreads, it is increasingly becoming ready to grow again.”
Although spreads sales dipped during the quarter due to declining margarine markets, Unilever said it saw a positive response to the launches of clean-label Country Crock and I Can’t Believe It’s Not Butter varieties.
“Our job is not just to win share within margarine,” Mr. Polman said. “It is also to grow the margarine category as a whole, with products that offer more healthy but still great tasting alternatives to pure butter.”
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Early results of new variants made with butter in European markets also showed promise, he added.
“We are under no illusions that it will take time to get spread back to growth, but there are some encouraging early signs of progress,” Mr. Polman said.
Unilever’s disposal of food businesses began in December 2011, when it completed the sale of its Mrs. Dash, Molly McButter, Sugar Twin, Baker’s Joy, Static Guard and Kleen Guard brands to Parsippany, N.J.-based B&G Foods, Inc. for $325 million in cash. The shedding continued in September 2012, when Unilever completed the sale of its Bertolli and P.F. Chang’s Home Menu frozen meals business to ConAgra Foods, Inc. for $267 million. In January 2012, Unilever agreed to sell its Skippy peanut butter brand to Hormel Foods Corp. for $700 million. Unilever also completed the sale of its Wish-Bone and Western dressings brands to Pinnacle Foods, Inc. for $580 million in October.
“Food is a category that has played, for a long time, the role of funding growth in other parts of the business, as we streamlined its portfolio and its cost and shed some of the underperforming assets,” Mr. Polman said. “We’ve been thankful for that, as without it, we could not have outperformed in personal care and home care.”
Still, Unilever’s food unit makeover may not be finished.
“… there is still a drag from non-core parts of the portfolio,” Mr. Polman said. “We have been addressing this (impasse) with disposals in 2013, including Wish-Bone, Skippy and Unipro, which is our Turkish oil business; in fact, some €600 million of turnover in total. Where sensible, we will continue to do this.”
In the year ended Dec. 31, 2013, the company reported net profit of €5,263 million ($7,119 million), up 9% from €4,836 million ($6,541 million) in fiscal 2012. Revenues declined 3% to €49.8 billion ($67.4 billion) during the year.
Unilever had underlying sales growth of 4.3% during the full year and 4.1% during the fourth quarter. But in the Foods segment, underlying sales growth was 0.3% during the year and 1% during the quarter.
“There are early encouraging signs that the new marketing strategy for spreads, for example, is the right one, and our portfolio is in better shape following the disposals we’ve made and, in some extent, we continue to make,” Mr. Polman said.
In the Refreshment segment, innovations in tea, including the launches of Lipton K-cups and Lipton Yellow Label tea bags, helped offset pressures elsewhere. Underlying sales growth in the category was 1.1% for the year but down 1.2% during the quarter, reflecting negative impacts from a recall of Ades soy drinks in Brazil and softening ice cream sales in the United States, where the company sells Ben & Jerry’s and Magnum brands.
Date: Jan 21, 2014