Unilever pledges to modernise food portfolio

By Michelle Perrett

- Last updated on GMT

Unilever will continue to modernise its portfolio
Unilever will continue to modernise its portfolio

Related tags: Chief executive officer, Unilever

Unilever has said it will continue to modernise its food portfolio through “innovations and acquisitions” after the company revealed market conditions “remained challenging” in 2017.

The company, which has a number of divisions, including food, refreshment, personal care and home care, said its market volumes grew at less than 1% as a result.

It said that growth in savoury products was “above the group average” ​and highlighted the success of Knorr, which had responded to consumer needs of naturalness and time-saving, and Pot Noodle.

In dressings, Hellmann’s relaunched the brand with stronger natural claims in 25 markets, while the organic variants were rolled out from North America into Europe.

Growth moderated

However, volume growth had been moderated by “increased promotional intensity​” during the year, particularly in North America. In spreads, Unilever said the rate of decline slowed during the year, helped by good innovation performances in areas such as margarines, with speciality oils and dairy-free products.

The company said it was evolving its product portfolio at an “accelerated pace”​, buying UK food businesses including Pukka Herbs’ organic herbal tea.

Its refreshment division had a good year, with ice cream innovations performing well, it said. These included Magnum pints described as “the ultimate chocolate and ice cream experience in a tub”​ and Magnum double raspberry and coconut variants, which contributed to double-digit growth.

Speciality tea

Unilever said it was seeing the benefits of innovating in the speciality tea category internationally. Its Brooke Bond brand grew strongly, helping it to achieve market leadership in the tea category in India. It introduced Pure Leaf to Canada and the UK after its successful US launch.

Paul Polman, chief executive officer, said the company had delivered a good all-round performance. 

“Our priorities for 2018 are to grow volumes ahead of our markets, maintain strong delivery from our savings programmes and to complete the integration of Foods & Refreshment as well as the exit from spreads,”​ he said.

Operating margin

“We expect this will translate into another year of underlying sales growth in the 3%–5% range, and an improvement in underlying operating margin and cash flow, that keeps us on track for the 2020 targets.”

Ernesto Bisagno, vice-president senior credit officer at Moody’s and lead analyst for Unilever, said: “We expect Unilever’s underlying revenue to grow over the next 12–18 months at around the current level of approximately 4%, and margins to improve.

Debt

“However, as a result of increased shareholder distributions and M&A ​[mergers and acquisitions] activity, combined with restructuring costs, we expect gross financial debt to increase at a higher pace than earnings, which would leave Unilever’s credit metrics weakly positioned in the A1 rating category.”

Reporting on full-year results for 2017, Unilever’s underlying sales, including spreads, grew by 3.1%. The company said its underlying operating margin had risen from 16.5% to 17.5%.

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