Consumer packaged goods company Unilever has announced an overall decline in sales and profits for the first three months of 2009. The firm has been hit by falling sales in developed countries, although growth has been seen in emerging markets. Many consumers have traded down as their disposable income shrinks, but investment from Unilever should ensure that it remains in a strong position.
Unilever, an Anglo-Dutch consumer firm, has reported a significant drop in profits of 45% for the first quarter of 2009 when compared to the previous year. The company's sales suffered a 1% decline to E9.5 billion, with a 2.8% fall seen in Western Europe. However, sales in the company's African and Asian operations showed healthy growth of 9.5%.
Unilever has vowed to step up innovation and brand support in a bid to improve its figures over 2009. The company is particularly keen to reverse a decline of 1.8% in overall sales volume. Some products have seen price rises in the face of soaring ingredient costs, at a time when a lack of disposable income for many consumers has seen them trade down.
Several companies have turned to emerging markets in a bid to further drive sales as many Western markets reach maturity and begin to stagnate. The strong performance of Unilever in these countries emphasizes the merits of this strategy for manufacturers of consumer packaged goods.
The threat posed by private label products looms large for Unilever, with customers, particularly those in Western Europe, looking to trade down to cheaper substitutes. The image of own-brand goods has improved in recent years, and many consumers now view such items as viable alternatives to known brands. This is of significant importance for Unilever's household cleaning offerings such as Surf, Cif and Persil. The category is not conducive to creating strong brand loyalty among customers, who will readily switch to cheaper products.
Unilever's product portfolio encompasses a wide range of consumer packaged goods, so an overall decrease in sales and profits could be seen as evidence of continuing economic woes. However, the company has continued to perform well in emerging markets, where the impact of the recession has not been so severe. Investment in the right areas should ensure that Unilever is in a good position to capitalize when global markets begin to recover.