Arab Musketeers

The new CEO of Unilever announces a focus on outstanding products.

In order to increase its margins and get back to volume growth, Unilever’s new CEO, Hein Schumacher, has stated that the business will concentrate on making sure its products perform better than those of the competition.

In light of the company’s report on modest margin expansion for the first half of its financial year, Unilever’s new CEO has made it clear that he will be elevating the importance of exceptional products on the agenda.

Hein Schumacher expressed his passion for dynamism within FMCG and at Unilever in his maiden speech to investors since succeeding Alan Jope at the beginning of the month.

While he acknowledged that he had “been impressed by a lot” during his first few weeks at the business, he also expressed his belief that “there is a real opportunity to step up our performance and competitiveness and drive significant value creation ahead,” particularly around product excellence.

 

On a conference call with investors today (July 25), he stated, “I want to see more of our products performing better than the competition.” “Our brands should consistently outperform competitors in superiority tests, and when they don’t, we should act swiftly.”

In FMCG, he continued, the “final say” belongs to the consumer, so it is crucial to ensure that products surpass the competition. According to Unilever’s most recent figures, only 41% of its business is growing share over a rolling 12-month period.

 

The corporation has faced criticism from investors under the former CEO of Unilever for its emphasis on brand purpose, with claims that it was prioritizing purpose over product.

Product will be a top emphasis for Schumacher throughout his term as the consumer products company’s CEO, he said today. The company’s top marketer at Unilever, Conny Braams, who is leaving the company in August, said last month that having the “right product at the right price” should come before purpose.

 

 

Schumacher described a sharp focus on the innovation pipeline and sustainability in addition to high product quality.

He also expressed his determination to support Unilever’s newly implemented corporate structure, which was implemented last year. This organizational structure separates the business into five categories, including ice cream, nutrition, and personal care.

At Unilever, Schumacher stated he wants to strengthen a “performance culture” and further this framework.

The new organizational structure, according to chief financial officer Graeme Pitkethly, has led to “bigger and bolder investment decisions.” He cited the sponsorship of the FIFA World Cup by Unilever’s personal care division as an example. This agreement, which will last through 2027, went into effect with the current Women’s World Cup.

 

 

“Under the complexity of the old organization, it would have been very difficult to make a global investment of this scale,” Pitkethly added.

In the first half of 2023, the firm added an additional €400 million (£344 million) to its marketing budget, with the majority of that money going into consumer-facing media. Unilever promised to increase its marketing spending in 2023 after investing an additional €500 million (£430 million) the previous year. In 2022, it spent almost $7.5 billion (£5.4 billion) on marketing.

Pitkethly continued that the company prioritizes increasing gross margins while still remaining committed to increasing investment in its brands as it transitions into a new leadership phase.

 

The company, which owns brands like Hellmann’s, Persil, and Dove, today recorded a profit of €5.2 billion (£4.5 billion) for the six months that ended in June, a rise of 3.3% over the corresponding period in 2017.

Additionally exhibiting signs of growth, its gross margin increased by 30 basis points from the previous year to 0.3%. This is still 270 basis points below levels for 2019 though. Pitkethly informed investors that despite its modest size, the improvement demonstrates a significant emphasis on pricing and savings.

The business’s revenue rose 2.7% to €30.4 billion (£26.2 billion).

 

This pricing move was the primary contributor to the 9.1% underlying sales rise that Unilever reported. Sales fell by 0.2% for the company in the first half of the year, but prices rose by 9.4%.

 

Particularly, volume sales fell sharply, falling by 9.7% in Europe. Sales continued to increase by 4.3% despite a 15.5% price hike.

Charli Huggins, manager of the quality shares portfolio at Wealth Club, describes the findings as “solid but uninspiring.”

Should Unilever be performing better, then? The likelihood of this being true is high. Huggins cites Europe as a specific problem region and notes that margins are still far below pre-pandemic levels. “Under the bonnet of that robust underlying sales growth there are problems,” he adds.

Spread the love