By Saabira Chaudhuri 

LONDON -- Unilever PLC missed sales forecasts in the first half of the year as cool weather and intense competition hit ice cream sales in Europe and North America.

The maker of Hellmann's mayonnaise and Dove soap said Thursday that underlying sales growth -- a closely watched figure that strips out currency movements and deals -- rose 3.3% in the six months to June 30. Analysts had expected growth of 3.5%. Shares fell 1% in early trading.

Unilever, the world's largest ice cream maker with brands including Ben & Jerry's, Magnum and Talenti, said growth in the second quarter was dragged down by 0.5 percentage point because of the category's weak performance. It blamed cool weather in Europe and a tough environment in the U.S.

In an interview, Chief Financial Officer Graeme Pitkethly said the company was struggling to raise prices and bolster profit margins for its mainstream ice cream brands like Breyer's in the U.S. where Unilever is seeing intense competition from regional players like Blue Bunny.

Americans eat more ice cream per capita than anyone else in the world with most bought in supermarkets for consumption at home. "It's very much a mainstay of every meal in the U.S.," said Mr. Pitkethly. "That makes it highly promotional."

In response, the company -- which has over 20% of the U.S. ice cream market according to Euromonitor -- has been pushing harder to sell its premium brands in more supermarkets. In 2017, it launched its own high-protein, low-sugar ice cream under Breyer's to battle competition from upstart brand Halo Top, which has also taken a share in recent quarters.

Last year Unilever rolled out Culture Republick in the U.S., a new low-calorie ice cream brand containing probiotics in flavors like turmeric chai and cinnamon, and milk and honey. The pint packs are designed by emerging artists, while a slice of the brand's profits donated to support art in local communities.

Imbuing brands with a social purpose is a strategy that Unilever's new Chief Executive Alan Jope hopes to roll out across its portfolio after insights showed consumers are more likely to buy, and remain loyal to, such brands.

"All the evidence is brands with strong purpose grow faster," said Mr. Pitkethly.

Unilever has been tapping its data scientists and mining social media for new business ideas, including a direct-to-consumer ice cream home delivery service. The company discovered a spike in online ice cream orders in the U.K. on rainy days, which ultimately led it to launch Ice Cream Now 18 months ago. The service is available in the U.S. and Europe, said Mr. Pitkethly.

Still, Unilever's ice cream trade overall in Europe was hampered by wet weather in the second quarter after two years of hot summers that had buoyed sales.

Average rainfall across 12 European cities was three times higher in April and May than the prior-year while average hours of sunshine were down 9% in April from a year earlier and 25% in May, according to analysts at Jefferies.

All that contributed to an overall decline of 0.7% in underlying sales growth for developed markets in the first half of the year, compared with a rise of 6.2% in Unilever's emerging markets.

Underlying sales dropped 0.6% in Europe, further dampened by price deflation, while in North America they were flat.

Ice cream sales overall rose 2.2% on an organic basis in the first half of the year, helped by a good first quarter and strong second-quarter ice cream sales in big emerging markets like Turkey and India. In Indonesia, after a difficult few years, Unilever's ice cream sales are improving after the company launched a low-cost brand to compete with local rivals.

Overall, the Anglo-Dutch company reported a net profit of EUR3 billion ($3.35 billion) for the six months to June 30, compared with EUR3.03 billion a year earlier. Revenue declined 0.9% to EUR26.13 billion from EUR26.35 billion driven by the sale of Unilever's spreads business last year.

Write to Saabira Chaudhuri at saabira.chaudhuri@wsj.com

 

(END) Dow Jones Newswires

July 25, 2019 04:56 ET (08:56 GMT)

Copyright (c) 2019 Dow Jones & Company, Inc.
Unilever (LSE:ULVR)
Historical Stock Chart
From Feb 2024 to Mar 2024 Click Here for more Unilever Charts.
Unilever (LSE:ULVR)
Historical Stock Chart
From Mar 2023 to Mar 2024 Click Here for more Unilever Charts.