Unilever best-placed to take advantage of growth in China and India

Unilever has the strongest emerging market portfolio of any global fast moving consumer products (fmcg) business, according to a new report from analyst Numis Securities.

By the end of the decade, developing and emerging (D&E) markets will account for more than 50% of group sales at Unilever, predicted Numis. For Nestlé, D&E markets represent 29% of group sales, while for Kraft the proportion is under 10%. For Unilever, the proportion is already 43%, said Numis. “With business disposals and organic growth, we would expect this to rise to more than 50% of group sales by 2010.”

Given the higher growth potential in D&E markets, this meant Unilever was uniquely placed among its peers to cash in, said the report.

While packaged food accounted for just 5% of India’s $275bn retail food market, it would grow rapidly, generating a major opportunity for Unilever to grow brands such as Knorr, Annapurna and Kissan, said the report. “Knorr [at 3.7bn euros, it is Unilever’s largest brand] has given Unilever the brand and product platform to begin to really build a D&E food business.”

While just under a third of Knorr’s sales were in D&E markets, Unilever is confident they will deliver 63% of the brand’s growth, said Numis. “For Knorr to achieve double digit sales growth in emerging markets looks perfectly reasonable.”

Unilever has also made a substantial investment in its sales force in China in recent months, with big growth opportunities in tea, ice cream and savoury culinary categories, said Numis.

However, it would have to be careful not to let products and brands proliferate in a bid to meet local market requirements, Numis warned. “While some variation is needed to cater to consumer palates, having more than 60 dried tomato soup recipes seems superfluous. This proliferation of everything from SKUs (stock keeping units) to marketing, product costings, procurement and invoicing is always what happens when brands are run by local markets.

“The benefits of internationalisation end up being substantially missed. For Unilever this is an absolutely crucial point.”