Unilever chief executive Alan Jope will likely look to 'reshape' the group's portfolio in order to put its sales growth back on track, a leading industry analyst has said.
Russ Mould, investment director at AJ Bell was commenting following a Unilever trading update this week, in which it said that it said that sales growth was likely to fall below expectations for the year.
“Growth remains our top priority and we are confident we have the right strategy and investment in place to step up our performance," Jope said of the group's performance.
Sales Expectations
“Even a bucket of Domestos couldn’t clean up the stink created by Unilever’s trading update," Mould commented. “The company revealed that not only is sales growth short of expectations for 2019 as a whole but it will also be behind in the first half of 2020.
“It is easy to see the expectation for next year to have a second-half weighting translate into a further warning if sales do not recover."
At the group's investor day in November, CEO Jope noted that improving growth rates was a major focus for the group.
“It now appears this will be very much a long-term project as Jope looks to reshape the portfolio of brands through investment, acquisitions and disposals," commented Mould.
“Another challenge for Unilever, and other big consumer goods firms, is weakening brand power amid increasing levels of choice for consumers," he added. “The company does at least seem able to keep its profit ticking over thanks to tight control of costs and it is notable that earnings, margins and cash flow are not expected to be impacted by the shortfall on sales.”
Brand Portfolio
Elsewhere, Dean Best, Food Editor at GlobalData noted that while Unilever continues to make tactical acquisitions, such as The Vegetarian Butcher, the majority of its portfolio is focused on mature, centre-store categories.
"Although Unilever’s sluggish growth is not just down to its food business, today’s sales warning will only add to the questions in the market about the company’s position in food," he said.
“Some want disposals to be made but that could hamper Unilever’s scale in some emerging economies. There could, however, be some candidates up for sale in developed markets, such as in parts of its condiments business."
Best added that when GlobalData asked the head of Unilever's food division earlier this month as to whether disposals could come from that portfolio, she replied simply, "Time will tell".
© 2019 European Supermarket Magazine – your source for the latest retail news. Article by Stephen Wynne-Jones. Click subscribe to sign up to ESM: The European Supermarket Magazine.
