Unilever – too soon to judge turnaround plan

Unilever, the maker of Ben & Jerry’s ice cream and Marmite, has announced its full year results, revealing that underlying sales growth was seven per cent, with prices increasing by 6.8 per cent and volumes up by 0.2 per cent. Meanwhile, underlying operating profit rose 2.6 per cent with operating margins improving by 60 basis points (0.6 per cent).

In this financial year, Unilever is aiming for underlying sales growth of three to five per cent , with modest operating margin improvement

“Unilever’s performance in 2023 was uninspiring, with notable weakness in Europe and ice cream, driven in part by market share losses to private label competition,” said Charlie Huggins, Manager of the Quality Shares Portfolio at analysts Wealth Club.

He added that Unilever’s new CEO, Hein Schumacher, recognises that the group could and should be doing better. Schumacher’s “Action Plan” is designed to reinvigorate performance through more impactful innovation, productivity savings and an improved culture, with an enhanced focus on the top 30 Power Brands.

“The success of this Action Plan is too early to judge, but investors should not expect quick fixes. The plan isn’t just about cutting costs and increasing efficiency. It’s designed to make Unilever a more innovative business, with stronger, faster growing brands. This requires increased brand and marketing investment, and will not be quick or easy to achieve.

“Overall, there is a lot to like in new CEO, Hein Schumacher’s Action Plan. But it is hard to escape the conclusion that the environment for Unilever and its peers has become much tougher in recent years. 

“Cost of living challenges mean private label brands have never been more appealing, meaning Unilever is having to work harder just to maintain market share, let alone grow it. This Action Plan feels like it has more substance than past initiatives, but it needs to succeed to stop the business going backwards.”